Norfolk Dredging Company v.  John L. Wiley

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
 NORFOLK DREDGING COMPANY,
Plaintiff-Appellant,
v. No. 05-1331 
JOHN L. WILEY,
Claimant-Appellee. 
Appeal from the United States District Court
for the Eastern District of Virginia, at Norfolk.
Rebecca Beach Smith, District Judge.
(CA-04-619-2)
Argued: November 29, 2005
Decided: March 3, 2006
Before NIEMEYER, LUTTIG, and TRAXLER, Circuit Judges.
Affirmed by published opinion. Judge Niemeyer wrote the opinion,
in which Judge Luttig and Judge Traxler joined.
COUNSEL
ARGUED: James Long Chapman, IV, CRENSHAW, WARE &
MARTIN, P.L.C., Norfolk, Virginia, for Appellant. Ralph Rabi-
nowitz, RABINOWITZ, SWARTZ, TALIAFERRO, SWARTZ &
GOODOVE, P.C., Norfolk, Virginia, for Appellee. ON BRIEF: Stu-
art P. Sperling, CRENSHAW, WARE & MARTIN, P.L.C., Norfolk,
Virginia, for Appellant.

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OPINION
NIEMEYER, Circuit Judge:
After John Wiley, a seaman, was injured aboard the tug Pusher #10
— a heavy line snapped and struck his face — the tug’s owner, Nor-
folk Dredging Company, commenced this action in admiralty to limit
its liability to the value of the tug, in accordance with the Limitation
of Liability Act, 42 U.S.C. app. § 181, et seq., and Supplemental
Admiralty and Maritime Claims Rule F. The district court approved
the value of the tug tendered by Norfolk Dredging and enjoined all
other actions against Norfolk Dredging or the Pusher #10 arising
from the incident, requiring claimants to file their claims in this
action.
Wiley, the only person injured in the accident, filed a claim
exceeding the tug’s value, together with a motion to dissolve the
injunction and stay this action to permit him to pursue his Jones Act
claim and related admiralty claims in state court. In support of his
motion, Wiley stipulated to exclusive federal jurisdiction over all
Limitation of Liability matters, to the value of the Pusher #10, and
to Norfolk Dredging’s right to limit liability. He also committed that
he would not undercut Norfolk Dredging’s Limitation of Liability
right by asserting res judicata arguments based on any state judgment
that he might obtain. Wiley did not, however, agree that the value of
the Pusher #10 alone was the maximum limit of Norfolk Dredging’s
liability; he alleged that pursuant to the "flotilla doctrine," the maxi-
mum limit of Norfolk Dredging’s liability also included the value of
three other vessels involved in the dredging operations when he was
injured. Accordingly, Wiley filed a motion to increase the "limitation
fund" to the value of all four vessels involved in the dredging opera-
tion.
Resolving the tension between Wiley’s right to bring a Jones Act
claim in state court and Norfolk Dredging’s right to have its liability
limited by a federal court under the Limitation of Liability Act, the
district court entered an order dated February 22, 2005, dissolving the
injunction and staying this action in accordance with the principles
stated in Lewis v. Lewis & Clark Marine, Inc., 531 U.S. 438 (2001).
The court found that Wiley’s stipulations adequately protected Nor-
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folk Dredging’s right to limit its liability. The court temporarily
denied Wiley’s motion to increase the limitation fund through the
application of the flotilla doctrine, reasoning that Wiley’s flotilla doc-
trine argument would become moot if a state jury awarded Wiley less
than the value of the Pusher #10. The court permitted Wiley "to
renew [his motion] in the limitation action, if necessary."
From the district court’s interlocutory order dissolving its earlier
injunction, Norfolk Dredging filed this appeal, contending that
Wiley’s stipulations do not adequately protect its federal right to limit
its liability and that, in any event, Wiley waived his right to move the
district court to dissolve the injunction by filing motions for affirma-
tive relief and by pursuing discovery in this action.
For the reasons that follow, we conclude that the district court did
not abuse its discretion in dissolving the injunction and therefore
affirm.
I
On November 27, 2003, Norfolk Dredging was dredging a docking
basin at an ammunition depot in the port of Sunny Point, North Caro-
lina, using four vessels that it owned — the tug Pusher #10, the tug
Norfolk, the hydraulic dredge Charleston, and the anchor barge Dia-
dapper #2. Wiley, a crew member on the Charleston, was serving as
a deckhand on the Pusher #10 when a two-inch line parted and struck
him in the face, seriously injuring him. No one else was injured in the
incident.
Norfolk Dredging commenced this action on October 19, 2004, to
limit its liability to the value of the Pusher #10, pursuant to the Limi-
tation of Liability Act, 46 U.S.C. app. § 181 et seq. Norfolk Dredging
claimed that the value of the Pusher #10, a 39-foot steel-hulled tug-
boat, was no greater than $80,000 and tendered that amount as a limi-
tation fund. By order dated October 20, 2004, the district court
approved Norfolk Dredging’s proffered value and entered an injunc-
tion enjoining all suits against Norfolk Dredging or the Pusher #10
and directing all persons with claims arising out of the November 27,
2003 incident to file them in this action.
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Wiley filed a claim in this action seeking $1.25 million as dam-
ages. He also filed a motion to increase the limitation fund, asserting
that pursuant to the flotilla doctrine, Norfolk Dredging’s limit of lia-
bility should be no less than the value of all four vessels involved in
the dredging operation on November 27, 2003. He alleged that all
four vessels were working together; all were owned by Norfolk
Dredging; and all were contractually engaged in a common enterprise
under a single command.*
Wiley also filed a motion to dissolve the injunction and stay the
federal proceeding to allow him to pursue his claim under the Jones
Act before a jury in state court. To support his motion, Wiley stipu-
lated (1) that the district court had exclusive jurisdiction to decide all
Limitation of Liability issues; (2) that the value of the Pusher #10 was
$80,000, reserving his contention that the limitation fund should also
include the value of the other three vessels pursuant to the flotilla doc-
trine; and (3) that he was the only claimant with respect to the
November 27, 2003 incident. He also assured the court that he would
not make any res judicata argument based on a judgment in state
court that he might obtain and that he would not seek to enforce any
such judgment in excess of the limitation fund as determined by the
district court.
The district court concluded that Wiley’s stipulations and undertak-
ings would adequately protect Norfolk Dredging’s Limitation of Lia-
bility right and accordingly granted Wiley’s motion to dissolve the
injunction, staying the federal proceeding to permit Wiley to pursue
*The flotilla doctrine is described in Sacramento Navigation Co. v.
Salz, 273 U.S. 326, 329-30 (1927), which held that "any vessel transport-
ing merchandise or property," as that phrase is used in the Harter Act,
included both the tug and barge in dispute because both were "indispens-
able" to carrying out the maritime contract to transport goods and there-
fore were "in law, one vessel," and Liverpool, Brazil & River Plate
Steam Navigation Co. v. Brooklyn Eastern District Terminal, 251 U.S.
48, 52 (1919), which rejected the flotilla doctrine in a Limitation of Lia-
bility action where a barge and a disabled tug were lashed to the sides
of an actively powered tug because only the powered tug was "actively
responsible" for the collision, even though the barge was the vessel that
collided with the claimant.
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his Jones Act claim in a separate action before a jury in either state
or federal court. The court denied Wiley’s motion to increase the limi-
tation fund under the flotilla doctrine because the motion "may be
rendered moot if the claimant’s judgment in state court does not
exceed the Limitation Fund as it now stands." The court agreed, how-
ever, to reconsider the flotilla doctrine argument if Wiley’s Jones Act
judgment were to exceed $80,000 and Wiley again filed the motion
to increase the fund.
From the district court’s order of February 22, 2005, dissolving its
October 20, 2004 injunction and staying this action, Norfolk Dredg-
ing filed this interlocutory appeal. See 28 U.S.C. § 1292(a)(1).
II
Norfolk Dredging contends that the district court’s February 22,
2005 order dissolving its earlier injunction "contravenes the funda-
mental purpose of the Limitation Act — to protect shipowners’ rights
to limited liability." Because Wiley never stipulated to the value of
the limitation fund and therefore failed "to file all of the required stip-
ulations" (emphasis added), Norfolk Dredging argues that its right to
limited liability is left unprotected. Although Wiley did agree that the
Pusher #10 was properly valued at $80,000, he nonetheless contended
that the fund should also include the value of Norfolk Dredging’s
three other vessels engaged in the dredging operation at the time he
was injured. Norfolk Dredging asserts that the district court abused its
discretion in deferring its ruling on the limitation fund and staying
this action and that we should reverse the district court’s order and
direct the court "to adjudicate the issues of liability and limitation."
Wiley contends that the district court does not, under the principles
of Lewis, have to decide the limitation fund’s value as a condition of
exercising its discretion to dissolve the injunction. He argues:
If it is necessary to come back to the limitation court to
decide limitation of liability and the true amount of the limi-
tation fund, including the flotilla doctrine, the Federal Dis-
trict Court can be relied on to make appropriate findings and
decisions . . . .
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Thus, the issue presented is whether the district court’s order per-
mitting Wiley to pursue his Jones Act claim in a separate action
improperly denied Norfolk Dredging its Limitation of Liability right,
particularly when the district court postponed making a determination
of the amount of the limitation fund. We review for abuse of discre-
tion. See Lewis, 531 U.S. at 440.
The Jones Act gives Wiley the right to redress his personal injury
in state or federal court, before a jury or not, as he elects. See 46
U.S.C. app. § 688. Consistent with this array of choices available to
a Jones Act claimant, the admiralty jurisdiction of federal courts is
limited so as to save to seamen their remedies. Section 1333 of Title
28 provides:
The district courts shall have original jurisdiction, exclusive
of the courts of the States, of: (1) any civil case of admiralty
or maritime jurisdiction, saving to suitors in all cases all
other remedies to which they are otherwise entitled.
28 U.S.C. § 1333(1) (emphasis added).
At the same time, the Limitation of Liability Act gives a shipowner
the right to limit its liability through a proceeding in federal court in
admiralty. See 46 U.S.C. app. § 181 et seq.; Supplemental Admiralty
and Maritime Claims Rule F. The Act provides that a shipowner’s lia-
bility for claims such as Wiley’s shall not "exceed the amount or
value of the interest of such owner in such vessel, and her freight then
pending," so long as injuries arose "without the privity or knowledge
of such owner." 46 U.S.C. app. § 183(a). Congress passed the Limita-
tion of Liability Act "to assist shipowners by placing them in parity
with European (and particularly English) shipowners who had long
enjoyed the benefits of limiting their liability for marine disasters."
Pickle v. Char Lee Seafood, Inc., 174 F.3d 444, 448 (4th Cir. 1999).
The policy underlying liability limitation was "to induce the heavy
financial commitments the shipping industry requires by mitigating
the threat of a multitude of suits and the hazards of vast, unlimited lia-
bility as a result of a maritime disaster." Maryland Cas. Co. v. Cush-
ing, 347 U.S. 409, 414 (1954).
Recognizing the tension between the injured seaman’s right to trial
in a state or federal court before a jury, or not, for his Jones Act claim
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and related admiralty claims and the right of a shipowner to limit its
liability in federal court to the value of the vessel, the Supreme Court
has approved a procedure that permits the seaman to pursue his suit
and, at the same time, permits the shipowner to limit its liability on
that claim to the value of the ship. See Lewis, 531 U.S. 438; Lake
Tankers Corp. v. Henn, 354 U.S. 147 (1957); Ex parte Green, 286
U.S. 437 (1932); Langnes v. Green, 282 U.S. 531 (1931).
In Lewis, the Supreme Court’s most recent visit to this issue, the
seaman, who tripped over a wire on a ship and hurt his back, sued the
shipowner in state court for negligence under the Jones Act, unsea-
worthiness of the ship, and maintenance and cure. The shipowner
filed a separate complaint in federal court under the Limitation of Lia-
bility Act to limit the seaman’s claim to the value of the ship. The dis-
trict court approved the shipowner’s proposed value and enjoined the
filing or prosecution of any other claims. After the seaman stipulated
to facts and undertakings that would, in the end, limit his liability to
the value of the vessel, the district court dissolved its injunction and
permitted the seaman to pursue his state court action. In affirming the
district court’s decision to dissolve the injunction, the Supreme Court
stated:
[W]e believe that the District Court properly exercised its
discretion in dissolving the injunction that prevented peti-
tioner from pursuing his claims in state court. The District
Court, guided by our prior cases, attempted to reconcile
petitioner’s right to his remedy under the saving to suitors
clause with respondent’s right to seek limited liability under
the Limitation Act. The court dissolved the injunction
against the state court proceedings after it concluded that
respondent’s right to seek limitation of liability would be
adequately protected. Respondent’s rights were protected by
petitioner’s stipulation that his claim did not exceed the lim-
itation fund, petitioner’s waiver of any defense of res judi-
cata with respect to limitation of liability, and the District
Court’s decision to stay the Limitation Act proceedings
pending state court proceedings.
Lewis, 531 U.S. at 451-52. Emphasizing its holding that the seaman’s
personal injury action should be permitted to go forward so long as
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the shipowner’s Limitation of Liability right was protected, the
Supreme Court stated,
In sum, this Court’s case law makes clear that state courts,
with all their remedies, may adjudicate claims like petition-
er’s against vessel owners so long as the vessel owner’s
right to seek limitation of liability is protected. Respondent
seeks to invert that rule, making run of the mill personal
injury actions involving vessels a matter of exclusive federal
jurisdiction except where the claimant happens to seek a
jury trial. We reject that proposal. . . .
Id., 531 U.S. at 455-56 (emphasis added).
In this case, the district court relied on a series of stipulations that
Wiley presented to the court in connection with his motion to dissolve
the injunction and stay the limitation action. Wiley stipulated to the
district court’s exclusive jurisdiction over Norfolk Dredging’s Limita-
tion of Liability action; he waived his right to use any state court
judgment that he might obtain to preclude Norfolk Dredging from liti-
gating Limitation of Liability issues in federal court; he agreed to the
value of the Pusher #10; and he promised not to enforce any state
court judgment exceeding that amount until the federal court consid-
ered Norfolk Dredging’s limitation claim and, if he raised it again, his
motion to increase the fund to include the value of the flotilla. Essen-
tially, Wiley agreed that Norfolk Dredging’s liability will be limited
to the amount of the limitation fund in whatever amount the district
court fixes.
In providing these stipulations, Wiley agreed to the same stipula-
tions that were presented to the district court in Lewis except as to the
specific value of the limitation fund. Norfolk Dredging contends that
the absence of a stipulation as to the value of the limitation fund
makes Wiley’s stipulations inadequate to protect Norfolk Dredging’s
Limitation of Liability claim.
Norfolk Dredging has not, however, demonstrated to us how the
failure of Wiley to agree to the amount of the limitation fund preju-
dices its Limitation of Liability right. Stipulating that the fund, what-
ever its amount, is the limit of Norfolk Dredging’s liability insulates
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Norfolk Dredging from overpaying just as would a stipulation to its
precise amount. We cannot see how saving for another day the ques-
tion of Norfolk Dredging’s amount of liability prejudiced its general
right to limit liability. All the district court did in this case was effec-
tively to postpone, and thereby possibly avoid, resolving the novel
question whether to apply the flotilla doctrine to determine the size
of the limitation fund.
Moreover, postponing the determination of the final value of the
limitation fund in a Limitation of Liability action is consistent with
the broad power of the district court to manage its cases and to
reserve the determination of any important, yet potentially irrelevant,
issue until later in the proceedings. Even in Lewis, the district court
had not yet determined whether the shipowner was foreclosed from
limiting its liability due to its knowledge of or privity to the incident.
And the Rules expressly anticipate that the district court’s initial
approval of an amount for the limitation fund can be changed later
upon the motion of the claimant. See Supplemental Admiralty and
Maritime Claims Rule F(7) (authorizing the claimant by motion to
have the limitation fund increased). In fact, postponing a decision on
the final amount of the limitation fund was the precise procedure
approved in Two "R" Drilling Co. v. Rogers, 943 F.2d 576 (5th Cir.
1991).
In Two "R" Drilling, the Fifth Circuit approved the district court’s
decision to dissolve an injunction to allow state proceedings to con-
tinue even though the parties could not agree on the values of either
of the two vessels in dispute. Id. at 578. The claimant stipulated to
federal jurisdiction, waived application of res judicata principles, and
agreed not to enforce any state judgment exceeding the limitation
fund, which was initially constituted according to the shipowner’s
stated value of the two vessels, until the federal court could resolve
the value of the ships. The Fifth Circuit, as well as the district court
before it, held that these stipulations, even in the absence of a final
determination of the fund’s amount, were sufficient to protect the
shipowner’s right to limit liability.
Because Wiley has agreed that Norfolk Dredging’s liability will be
limited to the value of the fund, in whatever amount the district court
determines, the Limitation of Liability right is preserved. Wiley
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agreed to the jurisdiction of the federal court to decide the Limitation
of Liability claim, and he agreed that whatever judgment he might
obtain in state court will not be used to attack the Limitation of Lia-
bility claim, either through principles of res judicata or by enforce-
ment of the state judgment. Indeed, Wiley has agreed that the district
court retain jurisdiction until Wiley’s personal injury claim has been
determined. Thus, should Wiley’s stipulations provide inadequate
protection in some unforeseen way, the district court has continuing
jurisdiction to correct any deficiencies. See Lewis, 531 U.S. at 453-54
("[O]ut of an ‘abundance of caution,’ the [district] court stayed the
limitation proceedings so that it could act if the state court proceed-
ings jeopardized the vessel owner’s rights under the Limitation Act").
The district court acted well within its discretion in staging the pro-
ceedings by staying this action and allowing a state court action to
proceed, postponing until later the final determination of what the
precise amount of the limitation fund should be.
III
Norfolk Dredging also contends that Wiley has waived his right to
move for the dissolution of the injunction and for a stay of this action
because he has sought affirmative relief in this action by filing a
motion to increase the fund and by initiating discovery. Norfolk
Dredging urges that we treat Wiley like a defendant whose special
appearance for personal jurisdiction is converted to a general appear-
ance upon seeking affirmative relief or like a plaintiff who has waived
his right to remand in a removed case.
Norfolk Dredging’s analogies are, however, inapt. Wiley has not
objected to federal jurisdiction while taking advantage of it. Indeed,
he has stipulated to exclusive federal jurisdiction for purposes of
deciding the Limitation of Liability issues. Thus, Wiley’s motion to
increase the fund and his initiation of discovery are consistent with
his efforts to advance his position in the federal Limitation of Liabil-
ity case even as he also seeks to pursue a parallel state proceeding.
To the extent that there is potential for abuse of the federal process,
as Norfolk Dredging suggests, by protracting the proceedings or by
taking advantage of discovery in the federal proceedings in anticipa-
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tion of filing a state action, Norfolk Dredging is free to assert those
claims in the district court in the appropriate circumstances. We do
not suggest, however, that based on the record before us, there is evi-
dence of either undue protraction of the federal action or abuse of dis-
covery.
IV
Finally, Wiley requests that we impose sanctions on Norfolk
Dredging for filing a frivolous appeal. We do not, however, find Nor-
folk Dredging’s appeal frivolous and therefore deny his request for
attorneys fees and costs.
For the reasons given, the district court’s order of February 22,
2005 is
AFFIRMED.
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